What Options Are Betting on Financials

The developments at Lehman Brothers are making the options market swirl in general, according to Rebecca Darst of Interactive Brokers.

"In general, the brokerages, en masse, took a hit to morale on Lehman's ongoing struggle to survive, but if you take a look at the volatility developments, it certainly was most interesting in Merrill Lynch ," she said on CNBC's "Squawk Box" Thursday morning. "We saw a lot of seesaw action in Merrill Lynch options yesterday; actually, at one point, late in the morning, implied volatility on all Merrill Lynch options (check options here) blasted through those mid-July highs. ... There's still a large, large risk premium being priced into the options on Merrill, twice as many puts trading as calls. ... People are getting very defensive on Meriill." (See her full comments in the video)

As for Lehman itself: "Traders are taking it day by day, I think, like the rest of the market in Lehman. I suppose it's nice to see the implied volatility under 300 percent, but it's still like a 259 percent. This is a very high elevation compared to Lehman's historic volatility. Front-month options in Lehman are suggesting that we could see about three dollars, a little less than half the current show price, in play between now and the end of next week." (Check Lehman options here)

She indicated AIG options are still pricing in risk to the stock. (Check AIG options here)

She also discussed put-spread activity in GE stock . GE is the parent of CNBC.com. (Check GE options here)